Budget 2012: IT Inc speaks

The Times of India,

The technology sector hid its disappointment with Union Budget 2012 to term it a ‘mixed bag’ for the sector. The telecom operators rued the fact that no tax relief/benefits had been given to the sector even as service tax increase would mean the average user of telecom services will pay a higher monthly bill. The lack of relief in taxation left IT software sector was none too happy either. In fact, the sector has long represented for tax breaks on lines of SEZ scheme, without success. Here is who said what among the IT Inc:

Cellular Operators Association of India (COAI) “Contrary to the recommendations put forth by the industry, no tax relief/benefits have been granted to the telecom industry which keeps reeling under rising operating costs and deteriorating margins. Moreover, the increase in service tax from 10% to 12% will further affect the growth of the industry as it is detrimental to the objectives of rural penetration and affordable rates for the consumers. The increased costs will eventually be borne by the consumers in the form of higher charges for the services. It is very disheartening that there are still no provisions to support the industry which has been acknowledged as a vital contributor to the nation’s economic health.”

Sabyasachi Patra, Executive Director, MAIT “MAIT welcomes the allocation of 1000 crores for National Skill Devleopment Fund as that will help in bridging the gap in skills. Setting up a Credit Guarantee Fund to improve flow of institutional credit for skill development will also be a good move as it will help in acquiring specific skills by individuals… The FM has moved in the right direction in harnessing the power of technology to ensure direct transfer of subsidies to retailers and farmers thereby reducing leakages. In that regard, mFMS (mobile based Fertiliser Management System) is a great step.”

Rajdeep Endow, Managing Director, Sapient India “On the whole it has been a very average budget. There was an opportunity to make some clear moves to move the needle on growth and investment. Instead, we have been given a safe budget. The increase in excise duty and service tax will hurt growth and will likely cause inflationary pressures. For the IT industry, I expected to see MAT exemption to SEZ units, which did not happen. On the positive side, I welcome the increased investment in education, health care and housing.”

Rajesh Janey, President, EMC India & SAARC “The increased outlays on education with an emphasis of skilling the youth are necessary steps to leverage the demographic divided in the future and tap emerging opportunities in the areas of Information Technology such as cloud computing and Big Data. The decision to increase investment in Aadhar and leverage technology more in larger service delivery initiatives will also provide impetus to the domestic IT sector. Additionally, overall social development and improving India’s competitiveness in the areas of manufacturing, research and innovation augurs well for the overall inclusive growth of the economy.”

Partha Iyengar, VP, distinguished analyst, regional research director, India “The budget overall is a fairly ‘political budget’, with very little in the way of bold (or even timid) reforms to drive economic growth. Given the current economic climate it seems to be focused on not upsetting anyone (read political ‘allies’) too much, by not trying to please anyone too much. The only slight silver lining is the verbal emphasis and some increase in outlays to the infrastructure sector, but, given the massive requirements here, even this is likely to be seen as too little too late. From an IT sector perspective, there is nothing specific that is either a strong negative or positive. Some of the key areas of concern for the industry, like skills development have not received any major focus.”

Vsevolod Rozanov, President and CEO MTS India “While many systemic elements have been set right in the 2012-13 Union budget, however the telecom industry continues to face numerous challenges. Increase in service tax from 10% to 12% would increase cost of ownership of a mobile phone. This becomes all the more significant for CDMA-based mobile services which to a large extent services the telecom needs of customers who are at the bottom of the pyramid. From a global perspective, the telecom industry in India continues to attract the highest tax rate of 23%.

Looking in AGR terms, the telecom industry generates revenues of approx. Rs 122,000 crores, out of which Rs 28,000 crores is the approx. outflow to the exchequer. It would have been good, if this could have been rationalized. The telecom industry is clearly getting squeezed on account of such outflows and what makes the situation all the more difficult is the hesitation of banks to lend money to operators. All this naturally has a deep impact on the roll out of voice and data services for the common man, specially in the rural areas….”

Pradeep Jain, MD, Karbonn Mobiles “We as a constituent of the ever-evolving communication sector of the country would like to welcome the forward-looking Union Budget for 2012-13. By taking progressive policy measures the Finance Minister has been able to put forth a proposal which will definitely take the country on a path of progression. While we all acknowledge the contribution of the mobile phone industry to the growth of the Indian economy, it is heartening to know that the expected GDP growth for the financial year of 2012-13 will be in the range of 7.6%. This growth of the Indian economy being supplemented by the growth in the mobile phone sector of the country is definite to channel the sector on an evolutionary conduit. We welcome the Finance Minister’s move to cut customs duty on memory cards for mobile phones which while complementing the usage of storage cards will definitely help in increasing the usage of extensive mobile phones in the country.”

Hanuman Tripathi, Group MD, Infrasoft Technologies Ltd “The Finance Minister has announced no benefits for corporates. With global downturn, IT sector should have been given some benefits so as to boost the segment. The increase of service tax from 10 per cent currently to 12 per cent will cause further burden… There is a commitment of government to IT enable several sectors like LPG distribution, payments for government schemes and continued investments in Aadhar (UID) which is heartening to note as it will create more projects in domestic IT business….”

Dinesh Agarwal, Founder & CEO, IndiaMART.com “We welcome the Union Budget 2012-13 presented by the Hon’ble Finance Minister today. While the FM called for speedy reforms today, the Budget did not indicate much in that direction. The key highlight, however, was ‘GST’ which is now expected to be operational by August 2012…Another positive for MSMEs in this budget was allocation of Rs 5,000 cr to SIDBI for venture fund which would enhance equity availability to MSMEs. Exemption of capital gains tax from sale of property when proceeds are used for investment in SME would also help augment funds for SMEs to a certain extent… We believe that there was a scope for bolder announcements for MSMEs which could have brought a sea-change in their productivity and growth by eliminating the challenges faced by them.”